Archive for the ‘AIG’ Category

If the United States was an aircrft, Obama has already touched every dial and lever in the cockpit. And what does that mean? Only one thing for sure: Uncertainty. And a lack of confidence. That’s why businesses are not yet rehiring and people are holding on to their money. People are looking for more certainty and Geithner at Treasury isn’t offering that….

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By Will Marshall
Real Clear Politics

Progressives, who have so far marched in rare lockstep behind President Obama, are falling out over Treasury Secretary Tim Geithner’s plan to get credit flowing again. At issue are conflicting visions of exactly what kind of economy should emerge on the other side of today’s crisis.

Pundits and columnists traffic in certitudes, but the rest of us can be forgiven for not knowing whether the Geithner plan will actually work. We’re in terra incognita here, and analogies to the Great Crash of 1929, or more recent banking crises in Japan and Sweden, may be of limited utility. Amid all the complexity and uncertainty, the debate over Geithner’s proposal is a kind of ideological ink-blot test.

Some liberal critics charge that it is nothing more than a continuation of the Bush-Paulson policy of propping up failed banks and financial institutions until the crisis somehow resolves itself. They question whether Geithner, a former governor of the New York Federal Reserve, is capable of administering sufficiently harsh medicine to his former peers in the realm of high finance. Many conservatives, relieved by the voters of primary responsibility for fixing the mess, are hoping to exploit populist anger over the massive wealth transfer from taxpayers to Wall Street.

The essence of Geithner’s plan is to reanimate the market for the securitized mortgages and other loans that no one wants to buy now. Until banks can take these toxic assets off their books, they won’t be able to resume lending. Geithner proposes to use what’s left of the TARP (Troubled Assets Relief Fund) money to entice private actors, such as hedge funds, to buy the assets.

Treasury Secretary Tim Geithner. (AP Photo/Gerald Herbert)

The basic idea here is that these private money-managers will do a better job of pricing the assets than the government ever could. If the spoiled assets regain their value, these private buyers win–but so do taxpayers, who would no longer have to foot the whole bill for the failures of the past.

Conversely, if the assets do not regain their value, then everybody loses. Well, almost everybody. In order to persuade private buyers to take the plunge into the toxic pool, the Geithner plan insures them against downside risk.

Despite their admiration of Obama, many liberals are unhappy with this arrangement. They decry the plan as yet another subsidy to the very people whose reckless risk-taking in search of outsized profits got us into this mess. They complain that Geithner’s plan is, at best, a palliative that doesn’t address the underlying cause of seized-up credit markets — namely, the fact that major U.S. banks are, for all practical purposes, insolvent. Elizabeth Warren, a Harvard law professor who heads the panel Congress set up to oversee TARP, likens the Geithner plan to an IV drip for “zombie banks.”

Putting the big banks on life support, in this view, merely prolongs the agony and could lead to a long period of Japanese-style stagnation. Better to follow the sterner Swedish model: Nationalize insolvent banks, wipe out equity holders, and return a smaller number of healthy banks with clean balance sheets to private hands.

But nationalization could wind up costing taxpayers a fortune, while also causing collateral damage to the secondary market for securities backed by mortgages in other loans. Congress’ hot-headed reaction to the AIG bonus scandal did little to inspire confidence in the federal government’s ability to manage financial companies. Furthermore, Obama’s economic team seems willing to bet that bank assets are worth more than today’s depressed market prices suggest.

In short, Obama and Geithner are working to restore the financial sector as it existed roughly a decade ago….

French workers released a manager of U.S. manufacturer 3M held hostage for two days in a labor dispute over layoffs, the company said Thursday, amid rising French unemployment and public outrage at employers.

AP

A new poll indicated that French worker frustration remains high, with a majority of respondents predicting more violent incidents in response to the economic crisis. The hostage-taking was one of many recent efforts by French workers to protest the downturn.

Workers at a 3M factory in Pithiviers locked manager Luc Rousselet in an office Tuesday, demanding better severance packages for those laid off and better conditions for those who keep their jobs.

After discussions Wednesday that ran into the night, Rousselet was released overnight, company spokeswoman Catherine Hamon said. Rousselet, unharmed, then left the factory grounds.

The stimulus cost taxpeyers $787 billion. It was rushed through congress to create jobs. Few in congress even admitted to reading its 1,000 plus pages. The stimulus authorized the AIG bonus payments that nearly eveyone since saw as “outrage.”

Thanks to Chris Dodd and Tim Geithner apparently….

Now the president said he will use that anger and outrage that he himslf and congress fueled to sell more spending: his budget. The $3.6 trillion budget.

Did we get jobs from the stimulus or will we?

Calvin Woodward of the Associated Press said it pretty well today, “If space exploration were conducted like the job forecasts under the government’s new stimulus law, man surely would have missed the moon.”

CALVIN WOODWARD, Associated Press Writer
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WASHINGTON – If space exploration were conducted like the job forecasts under the government’s new stimulus law, man surely would have missed the moon. But this isn’t rocket science.

No promise from President Barack Obama is more important to the wounded economy than his vow to save or create some 3.5 million jobs in two years. In support of that bottom line, the government even tells states how many jobs they can expect to see from the spending and tax cuts.

But precise trajectories are impossible to plot and even approximations can be wildly off, as the authors of these forecasts acknowledge, usually more readily than the policymakers who use them to promote the plan.

Flip through the stacks of economic analyses underpinning the stimulus plan and you find a lot of throat-clearing qualifications and angst:

–“Very uncertain.”

–“Difficult to distinguish among alternative estimates.”

–“We confess to considerable uncertainty.”

–“Subject to substantial margins of error.”

In other words, who really knows?

Economic modeling may prove to be a haywire navigational device in this crisis.

“Large fiscal stimulus is rarely attempted,” Douglas Elmendorf, director of the nonpartisan Congressional Budget Office, told lawmakers. “For those reasons, some economists remain skeptical that there will be any significant effects, while others expect very large ones.”

Zero to nirvana? Even for economists, who routinely differ among themselves, that’s a range beyond the norm.

An anti-capitalist vigilante group calling itself Bank Bosses Are Criminals has claimed responsibility for an attack on the home and car of Sir Fred Goodwin, the former chief executive of the Royal Bank of Scotland.

The ex-banker’s £3 million Edinburgh house was targeted in the early hours, with at least four ground-floor windows smashed and a black Mercedes vandalised. Police were called at around 4.15am to Morningside, a leafy suburb of the Scottish capital lined with substantial, stone-built homes.

A storm of controversy has engulfed Sir Fred over the £16.9 million pension he negotiated as he was made to leave RBS last October for his part in bringing the bank to its knees. The 50-year-old financier has already started to collect an annual pension of around £700,000, and refused invitations to hand it back..

Less than an hour after the attack, an e-mail was sent to local media outlets, signed by Moira McLeod, claiming responsibility and threatening further vigilante assaults. The e-mail account used to send the warning was named “Bank Bosses Are Criminals”.

And then we have Nancy Pelosi, the third in line to the presidency, virtually telling illegal immigrants to violate the law: that the law is “Un-American.”

Well, here’s more “anything to win” — changing law by illegal acts and shenanigans.

If Nancy wants to make good law; she is in the catbird seat to do so. The Speaker of the House knows how to make good law and how to defeat those that stand in her way too….

Pelosi made the stimulus bill and Obama has already offered her the health care revolution. But she’s not satisfied yet: now she’ll rewrite immigration law by not picking up a pen: she’ll use the microphone.

When I wrote last week’s column, before the AIG fury erupted, I argued that we in Washington should dial back our rhetoric because public passions were already dangerously high — and we have so many hard decisions in probably hard times ahead of us that we need to face as a united people. Little did I expect that within hours of my writing those words, congressmen would be calling for the names and addresses of AIG employees to be made public — even though the congressmen had been told that the lives of the employees’ children had been threatened as a result of the uproar. Congressmen who would risk the lives of innocent children to save their own political skins are not likely to provide noble leadership in the months and years to come.

1) You’ve dismissed the stock market’s frequent zig-zags, but do you think Monday’s rally in the Dow amounted to a Wall Street stamp of approval for your bank bailout plan?

2) Given that 15 of the top 20 AIG bonus recipients are now returning their bonuses, do you think the House acted too hastily to pass a bill levying a punitive tax on those individuals?

3) You talked on “60 Minutes” about missing the ability to talk to everyday Americans, but can you tell them for a moment how this economic downturn is impacting you and your family?

4) Wall Street is, understandably, coming in for significant blame over the current financial crisis. But what responsibility, if any, do average Americans bear for the problem?

5) On health care, you included a government-run insurance option in your campaign platform. Is that a must for comprehensive legislation? Also, some in your own party have expressed concern about paying for healthcare by, in effect, raising taxes on upper-income taxpayers, as you have proposed. Are you willing to pay for it through other means?

6) How many appointees have received waivers from your new ethics rules barring lobbyists from working in government?

7) Larry Summers told New York Magazine last summer that he hoped you didn’t believe what you said about renegotiating the North American Free Trade Agreement with Canada and Mexico, while you were touting your opposition to the treaty on the campaign trail. So where do you stand now — will changing NAFTA become a priority for you, or not?

8) Throughout the campaign, you said Afghanistan represented the central front in the battle against Islamic terrorism but on “60 Minutes,” you said there must an “exit strategy.” How long do you expect to keep American troops on the ground there?

9) Appearing before a crowd chanting “Death to America” and “Death to Israel,” Iran’s Ayatollah Khamenei rebuffed your video outreach to this country last week. Is there any hope of reaching a new, less contentious relationship with Iran?

10) Most modern presidents have found it useful to confer with the other living presidents because of their unique insights and perspective. Can you tell us which presidents you have consulted since entering the White House and generally what you discussed?

President Barack Obama says he hopes “it doesn’t take too long” for Congress to approve new authority to oversee financial firms — and even take them over by the Federal Government if they are in economic trouble.

The president made the remark in the Oval office Tuesday afternoon, March 24, 2009.

The administration is pushing the idea of an overarching regulator, such as the Federal Reserve, to have the ability to take over nonbank financial entities whose failure could topple the entire financial system.

Congress has gotten us into trouble recently by rushing through important legislation or hearings.

The congress held no hearing on the president’s stimulus spending measure — with many member saying they didn’t have time to read it.

The stimulus assured AIG that it had the authority to pay bonuses.

Then the House last week rushed to vote a 90% tax on those same bonuses….an idea that could be unconstitutional…. and is certainly questionable….

US President Barack Obama (R) speaks with Australian Prime Minister Kevin Rudd in the Oval Office of the White House in Washington, DC. Obama said Tuesday he hoped to partner with Rudd for “years to come” after forging a “meeting of the minds” in their first White House talks. During this meeting, Obama told reporters, he hopes “it doesn’t take too long” for Congress to approve new authority to oversee financial firms .(AFP/Jim Watson)

Why are Democrats undermining President Obama? It’s easy to understand why Rush Limbaugh is hoping Obama will fail. From his perspective, Obama’s energy, labor and health care policies (among others) will yank the country hard to the left, weakening our capitalist economy and ushering in failed socialist policies. But why is his own party running so scared?

From the moment Nancy Pelosi instituted crassly partisan procedural rules on the opening day of the 111th Congress, mocking Obama’s promised new bipartisan era, Democrats in the House and Senate have done their utmost to discredit the president.
From wresting control of the Stimulus bill to packing that dismal piece of legislation with pork and an uncomfortable violation of NAFTA to the latest witch hunt over AIG bonuses, Congressional Democrats have worked to weaken the president and his deputies — most especially his beleaguered Treasury Secretary, Tim Geithner. What gives?

It is possible that my brain does not contain enough dark eddies to comprehend the devious calculations that have led to these maneuvers.

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If Congress continues to waver in its support of Obama’s agenda, the result may be even more internecine warfare and a watered-down list of programs. It will be a sad outcome for the party that has finally won control of the White House and Congress.

With the braying of 328 yahoos — members of the House of Representatives who voted for retroactive and punitive use of the tax code to confiscate the legal earnings of a small, unpopular group — still reverberating, the Obama administration yesterday invited private-sector investors to become business partners with the capricious and increasingly anti-constitutional government. This latest plan to unfreeze the financial system came almost half a year after Congress shoveled $700 billion into the Troubled Assets Relief Program, $325 billion of which has been spent without purchasing any toxic assets.

By George F. Will

TARP funds have, however, semi-purchased, among many other things, two automobile companies (and, last week, some of their parts suppliers), which must amaze Sweden. That unlikely tutor of America regarding capitalist common sense has said, through a Cabinet minister, that the ailing Saab automobile company is on its own: “The Swedish state is not prepared to own car factories.”
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Another embarrassing auditor of American misgovernment is China, whose premier has rightly noted the unsustainable trajectory of America’s high-consumption, low-savings economy. He has also decorously but clearly expressed sensible fears that his country’s $1 trillion-plus of dollar-denominated assets might be devalued by America choosing, as banana republics have done, to use inflation for partial repudiation of improvidently incurred debts.

From Mexico, America is receiving needed instruction about fundamental rights and the rule of law. A leading Democrat trying to abolish the right of workers to secret ballots in unionization elections is California’s Rep. George Miller who, with 15 other Democrats, in 2001 admonished Mexico: “The secret ballot is absolutely necessary in order to ensure that workers are not intimidated into voting for a union they might not otherwise choose.” Last year, Mexico’s highest court unanimously affirmed for Mexicans the right that Democrats want to strip from Americans.

Congress, with the approval of a president who has waxed censorious about his predecessor’s imperious unilateralism in dealing with other nations, has shredded the North American Free Trade Agreement. Congress used the omnibus spending bill to abolish a program that was created as part of a protracted U.S. stall regarding compliance with its obligation to allow Mexican long-haul trucks on U.S. roads. The program, testing the safety of Mexican trucking, became an embarrassment because it found Mexican trucking at least as safe as U.S. trucking. Mexico has resorted to protectionism — tariffs on many U.S. goods — in retaliation for Democrats’ protection of the Teamsters union.

NAFTA, like all treaties, is the “supreme law of the land.” So says the Constitution. It is, however, a cobweb constraint on a Congress that, ignoring the document’s unambiguous stipulations that the House shall be composed of members chosen “by the people of the several states,” is voting to pretend that the District of Columbia is a state. Hence it supposedly can have a Democratic member of the House and, down the descending road, two Democratic senators. Congress rationalizes this anti-constitutional willfulness by citing the Constitution’s language that each house shall be the judge of the “qualifications” of its members and that Congress can “exercise exclusive legislation” over the District. What, then, prevents Congress from giving House and Senate seats to Yellowstone National Park, over which Congress exercises exclusive legislation? Only Congress’s capacity for embarrassment. So, not much.

The Federal Reserve, by long practice rather than law, has been insulated from politics in performing its fundamental function of preserving the currency as a store of value — preventing inflation. Now, however, by undertaking hitherto uncontemplated functions, it has become an appendage of the executive branch. The coming costs, in political manipulation of the money supply, of this forfeiture of independence could be steep.

Jefferson warned that “great innovations should not be forced on slender majorities.” But Democrats, who trace their party’s pedigree to Jefferson, are contemplating using “reconciliation” — a legislative maneuver abused by both parties to severely truncate debate and limit the minority’s right to resist — to impose vast and controversial changes on the 17 percent of the economy that is health care. When the Congressional Budget Office announced that the president’s budget underestimates by $2.3 trillion the likely deficits over the next decade, his budget director, Peter Orszag, said: All long-range budget forecasts are notoriously unreliable — so rely on ours.

This is but a partial list of recent lawlessness, situational constitutionalism and institutional derangement. Such political malfeasance is pertinent to the financial meltdown as the administration, desperately seeking confidence, tries to stabilize the economy by vastly enlarging government’s role in it.

In recent days, in spite of public furor over huge bonuses paid at American International Group Inc., the administration has concluded that it needs the private sector to play a central role in fixing the economy. So over the weekend, the White House worked to tone down its Wall Street bashing and to win support from top bankers for the bailout plan announced Monday, which will rely on public-private investments to soak up toxic assets.

But weeks of searing criticism by politicians and the public had left bankers leery of working with the government. After brainstorming about what to do about that problem, the White House resolved to try to take control of the debate, according to several administration officials. In weekend television appearances, President Barack Obama and other administration officials tempered their criticisms of the financial sector.

President Barack Obama is trying to dampen a fire he once stoked, urging a more tempered response to public furor over bonuses paid to executives of the publicly rescued insurance giant American International Group.

By CHARLES BABINGTON, Associated Press

Obama is virtually certain to use Tuesday’s prime-time news conference to continue an effort that began over the weekend: cooling the anti-AIG ferocity, now that it threatens to undermine his efforts to bail out the nation’s deeply troubled financial sector.

Obama’s tone changed dramatically after the House voted last week for targeted taxes to take back most of the $165 million in bonuses paid to AIG executives. Many lawmakers felt Obama had encouraged their step, because he called the bonuses reckless, outrageous and unjustified.

In the White House, however, the situation seemed to be spinning out of control. Some fellow Democrats questioned the constitutionality and wisdom of the House’s action. Executives of other troubled companies signaled they would not make deals with a federal government that revises agreements after they are signed.